Electrolux: navigating through challenging market

Jonas Samuelson, President and CEO of Electrolux

In the second quarter 2020, Electrolux‘s net sales amounted to SEK 23,476 million (29,232 million in the same period of 2019). Organic sales declined by 16.6%, due to lower volumes. The development of the Coronavirus pandemic impacted market demand significantly and also resulted in supply constraints in North America. “During the months of March through May – explained Jonas Samuelson, President and CEO – we experienced significant volume drops across most of our regions due to the pandemic. As restrictions were eased or removed, demand picked up in June, even if the pace of recovery varies greatly between regions. In some markets, such as many European countries, the recovery pace in the latter part of the quarter has been faster than predicted. It was therefore encouraging that we in June had an organic growth of 3%. I am also pleased that despite challenging conditions we improved our mix this quarter as well. A good example is Australia where newly launched products continue to gain good traction. We have also delivered on the temporary cost and cash mitigation actions initiated in March; well above our expectations. This shows that both agility and cost focus are part of our DNA. We continue to follow through on our re-engineering and streamlining initiatives, yielding further structural efficiencies to strengthen our cost competitiveness also longer term. As we earlier announced, the Coronavirus situation leads to delays in some of our strategic investments of up to half a year and has also impacted the ramp-up of our new Anderson factory in the U.S. due to supply disruptions from Mexico and shutdowns/absenteeism, which also have impacted all our North American plants. This of course pushes cost savings from these investments forward, but I want to emphasize that we still expect our re-engineering and streamlining initiatives to generate approximately SEK 3.5bn of annual cost savings, with full effect from 2024. Despite the strong cost reduction execution in the quarter, it was not possible to offset both the 17% organic sales drop and a significant currency headwind and the quarter was slightly loss-making. The pandemic situation remains fluid, creating an extraordinary degree of uncertainty over what the full global impact on demand will be for the second half of the year. It depends on several factors such as virus resurgences, the extent of additional restrictive measures and the effectiveness of the massive stimulus packages on consumer confidence and demand. In the near term, we see good demand, partially driven by pent-up demand from April/May and the strong stimulus programs. However, for the full year 2020 we continue to expect negative demand in most of our main markets. Hence we expect a material financial impact related to the pandemic for the full year 2020, primarily due to the impact in the second quarter.
The increased time spent at home due to the pandemic has quickly changed consumer behavior. The importance of high-quality appliances with relevant features and benefits become more apparent. On the same note, we see consumers paying more attention to health and hygiene; meaning there is an increasing need for products that can boost wellbeing such as vacuum cleaners, air and water purifiers, dish washers and washing machines. Finally, consumers have become more digital and online purchases are growing significantly. These changes in consumer behavior reinforce our strategy and we keep accelerating innovation to deliver relevant products and services, including further development of our e-commerce capabilities.
Our strong commitment to sustainability remains unchanged and we see an opportunity to increase sustainable efforts as people change their behaviors due to the crisis. Although we are experiencing a challenging time, I am confident that Electrolux remains well positioned to create value”.